Bitcoin Currency Gains Foothold in South Florida

In mid-January, I was having a cappuccino at Brew Urban Café in Fort Lauderdale's Victoria Park when an acquaintance I knew only as Brian said hello. His tattooed friend plopped down at the table across from us. The friend opened his laptop and lit a cigarette. I noticed the two guys didn't have any coffee.

They were there to buy bitcoins.

"It's cryptocurrency," Brian began to explain, but was interrupted when their guest strode up — a slick, 20-something guy wearing jeans, white flip-flops, and a black tank top exposing his buff arms. Let's call him Neo.

Neo said he was selling bitcoins for $700-plus per coin, plus an 8 percent commission fee. Brian shook Neo's hand and passed him a folded stack of $800 in cash. (U.S. dollars, that is. There are no tangible bitcoins.) Neo fiddled with his smartphone, and the tattooed dude, eyeing his laptop, said the transfer had begun.

Neo, sporting dark sunglasses, explained that he bought 700 bitcoins a year ago and almost forgot he had them in his virtual wallet. Now he intends to sell them off and profit $100,000. Neo didn't say how much he'd paid for them, but a year ago, bitcoins were selling for about $15 apiece.

Bitcoin is said to have been created by a computer programmer called Satoshi Nakamoto. This is a male Japanese name, but it's never been traced to a real person, and no one knows for sure if one or many individuals created the electronic currency, which operates via open-source software and is shared through peer-to-peer networks. It was released through the internet in January 2009.

Anytime multiple people agree that an item — be it gold, silver, livestock, or an encrypted electronic signal — has value, it can be traded as currency. Since the United States moved off the gold standard in 1933, there's not been anything tangible to back up ours; U.S. dollars have value only because billions of people agree that they do. Bitcoin likewise will stabilize if and when more people believe it is valuable and more retailers accept bitcoins in exchange for goods. Overstock.com began accepting them at the turn of 2014. Vegas casinos began accepting bitcoins last week. Some South Florida businesses are now accepting them as well. The North American Bitcoin Conference took place this past weekend in Miami Beach.

Bitcoin is traded online — outside of any banks, beyond any central authority, and unregulated by any government. This makes the currency easy to transfer yet harder for anyone to control. Proponents say this is a good thing because it can unite the world on one currency and work independently of corrupt banks. But bitcoins were also used by people buying and selling drugs on the internet site Silk Road, and there is potential for them to be used for money laundering. China has banned banks from trading in bitcoins.

Some predict that bitcoin could replace gold or the U.S. dollar and have unknown effects on world financial systems. Others say it's a bubble that will crash. Because of all these concerns, the currency has a bit of an outlaw air.

Neo seemed nervous as he noticed me listening in. "Oh, who are you?" he asked. Brian assured him I was cool. To be friendly, I asked Neo where he lived.

"Around," he responded.

Soon after, he walked off. Brian and his tattooed friend explained they had met Neo on an online bitcoin forum. Because they weren't sure if he could be trusted, they'd bought just one coin. "The transfer is pending right now, but if this one goes through, we'll call him tomorrow and buy ten more," Brian said. Bitcoins can also be bought in fractions — you can get just $20 worth.

Dr. Charles Evans, a finance instructor with Florida Atlantic University, is an organizer of Miami International Bitcoin, a business networking group. "I was involved in e-currency in the 1990s, and then our industry dried up," Evans says. "When I first heard about bitcoin, I was skeptical at first, and some people told me that it was for real. And it became clear to me that it could become the currency of the developing world."

He explains, "Eighty-three percent of the world population lives [outside of wealthy nations]. The vast majority don't have bank accounts, [but] a huge portion of them own smartphones... which means I can send bitcoin to anyone who has a smartphone — in the world. That includes, for example, a small-scale coffee grower in Guatemala that is too small to deal directly with Publix or Costco. Multiply that by 100 million and the world will be a better place.

"This is not make-believe," he insists.

Vanity Cosmetic Surgery in Hialeah sells fake boobs for bitcoins. Barker Animation at Gulfstream Park in Hallandale Beach sells artwork in exchange for bitcoins, and you can buy flowers in bitcoins at Wellington Florist. Miami Beach-based Advantaged Yacht claims to be working on the first boat ever bought with bitcoins. A Southwest Florida-based app called CoinScout helps users locate bitcoin-friendly retailers.

Evans' wife, Angelina, has started a business, Bitcountant, that focuses on bitcoin accounting and compliance, "because there's a lot of regulation with bitcoin," Evans says. Users do have to pay taxes, he says.

Anyone looking to buy bitcoins need not meet clandestinely in coffee shops, Evans says; one can go to an online outlet like CoinBase. "Bitcoin sells for $820 at the moment for a whole unit," Evans says.

Bitcoin has gained more traction than prior electronic currencies because, Evans explains, there is "basically a huge spreadsheet out there that's transparent called the blockchain [online at blockchain.info]. Everybody has access to every transaction that happens. This is what keeps it honest, and this is what keeps its power: its transparency, and it is secured with military-grade encryption."

Also, because there is a finite number of bitcoins, their value goes up as demand puts pressure on supply. "It's scarce because there are only so many," Evans says. Ever since the U.S. went off the gold standard, the U.S. Treasury manages the number of dollars in circulation by printing more money or taking it out of circulation. But with bitcoins, "there's a fixed quantity."

"The best way to think of this metaphorically — 'What is this?' — is to imagine I had a box full of poker chips, and you and I were convinced that you cannot counterfeit the poker chips, and it turns out I can spend these things from my smartphone from anywhere around the world. And the transaction record is available for everybody to see, so I can't cook the books," he says. "And this industry is creating new jobs."

He's not surprised that sunglass-clad men are meeting up to deal bitcoins because "where there's money, there are colorful characters." Even when transactions are sold under the table, he explains, when the electronic transfer occurs, the blockchain notes that coin is being moved from one virtual wallet to another, even if the users' real names are anonymous. The government has ways to track bitcoin users, he says — that's how Silk Road got busted.

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